Religare Broking anticipates a significant re-rating for Reliance Industries Ltd (RIL) stock, primarily fueled by the proposed initial public offering (IPO) of its digital arm, Jio Platforms. The brokerage has reiterated its 'buy' rating on RIL, setting a target price of Rs 1,696, believing the Jio Platforms IPO will serve as a crucial trigger for market revaluation.
Jio IPO to Close Valuation Gap for RIL
According to Religare, a standalone listing of Jio Platforms will provide investors with a transparent, market-driven valuation for RIL's largest growth engine. This move is expected to help narrow the conglomerate discount typically applied to diversified companies like RIL, potentially leading to a substantial re-rating of the stock.
The brokerage suggests that RIL currently offers a favorable entry point for investors, following a two-year period of price and time correction. The stock is trading near the lower end of its historical multi-year range, which limits downside risks and indicates that previous premiums for future growth have been absorbed.
Financial Outlook and Strategic Impact
Jio Platforms reported robust financial performance in FY26, with revenue from operations reaching Rs 1,46,885 crore, an EBITDA of Rs 76,255 crore (representing a 51.9% margin), and a net profit of Rs 30,049 crore. The company also boasts a substantial subscriber base of over 524 million active users.
Religare noted that a significant portion of the net proceeds from the primary issue, approximately Rs 27,500 crore, is earmarked for repaying borrowings at Reliance Jio Infocomm. This debt reduction is expected to lower interest costs, improve margins, accelerate free cash flow generation, and strengthen Jio's balance sheet.
Future Growth Drivers for Jio and RIL
With heavy 5G capital expenditure largely complete, Religare believes Jio's capital intensity is easing. Future growth is projected to come from several avenues:
- Average Revenue Per User (ARPU) gains
- Upgrades from 4G to 5G services
- Expansion into enterprise cloud and AI services
Over the next 6 to 18 months, Religare anticipates that ARPU hikes and debt reduction will drive EBITDA expansion and a sharp increase in profits for Jio. Looking further ahead, over the subsequent 18 to 36 months, the brokerage foresees operating leverage in RIL's retail business and the scaling up of its New Energy ventures triggering a second group-wide re-rating, with the Jio Platforms IPO remaining the central catalyst.
"We maintain a conviction 'buy' rating on Reliance with a target price of Rs 1,696. The convergence of a two-year price and time correction, impending Jio price discovery, balance sheet optimisation, and multi-engine earnings compounding creates one of the most compelling risk-reward setups in the market today. We advocate initiating exposure at current levels and accumulating on corrections," Religare stated.
While reports suggest the Jio Platforms IPO is planned for October, an official timeline has not yet been announced by the company.